How are the sizes of the frames calculated. Say if my frame is 17", where do they get the numbers from? Do they measure the distance between the saddle and the handle bar pivot or where?

Its from the center of the bottom bracket to the top of the seat tube.....or something like that.

Actually it depends on the mafacturer. Some like KHS and iron Horse measure from center og b.b to top of seat collar. Some like trek and GT measure from center of b.b to center of top tube. Some are measured from center of b.b top top of top tube. So with that pull those measurements and see where it ends up.

So it doesn't mean that if I take a 17" frame from Giant, a 16" frame from GT will suit me?

Attached is a scan of page 87 from the 1970 book The Complete Book of Bicycling by Eugene A. Sloan.

This shows the commonly understood definitions of measurements as well as tube terminology:

If the bike has a sloped top tube, then the figure is fairly meaningless. As far as standover height goes, you also have to factor in the height of the bottom bracket from the ground (which can be quite high in some MTBs).

A much more important measurement is the length of the bike, which is a combinbation of effective top-tube length (horizontal dist from seatpost centre to headtube centre), + stem (+ drop bar/brake style). NB some of that length is behind the bottom bracket, some of it is in front. This makes a difference to the fit.

Personally when comparing frame geometries for fit, I take a weighted string and a tape measure, and sketch a quick graph of the points of contact (saddle/pedals/handlebars)